Canadian group leads €1.1bn investors in BofI

CANADIAN GROUP Fairfax Financial Holdings is leading a group of private investors who reached agreement with the Government early yesterday to buy as much as 37 per cent of Bank of Ireland.

Other investors include New York buyout firm WL Ross and Co, which is controlled by billionaire investor Wilbur Ross, and the Cardinal Capital Group, which is backed by Dublin executives Nigel McDermott and Nick Corcoran.

The group has agreed to buy up to €1.123 billion of the State’s shares, reducing the cash call on the Government under a plan to raise €1.91 billion in a rights issue of new shares which closes today.

Calls seeking comment from Fairfax were not returned, while a spokesman for Mr Ross and Cardinal had no comment to make.

The Department of Finance has declined to comment on the identify of the investors.

The deal with investors means that the bank avoids Government control – the only Irish bank to maintain a majority shareholding in private hands. At least 68 per cent of the shareholding in the bank will remain privately owned.

Under the deal the Government will retain a shareholding of at least 15 per cent but this may rise to 32 per cent depending on how many new shares will be taken up by existing shareholders.

The stake held by the private investment group may drop to 14 per cent if there is a high take-up of new shares, but under the deal the private investors would be entitled to a top-up of 5 per cent.

Existing shareholders will be left with a stake of between 31 per cent and 71 per cent depending on the take-up among shareholders.

Bank of Ireland said it would place an additional shareholding of about 6 per cent of the bank’s shares at 10 cent a share if the investors’ shareholding fell below 25 per cent and the State’s interest fell below 15 per cent.

Minister for Finance Michael Noonan said the deal did not involve “any form of additional risk-sharing by the State”.

He described the investment as “tangible proof of growing international confidence in the future prospects of both Bank of Ireland and the Irish economy”.

The identity of the investors will have to be declared under stock exchange rules as they each must disclose their interest once their shareholding passes 3 per cent.

The bank said it had been informed that each of the investors would manage their own shareholding independently.

The investors will initially purchase €241 million of the State’s shareholding and up to €882 million more after regulatory approval has been obtained.

The investors will purchase a total of 4.2 billion ordinary shares.

Bank of Ireland was ordered to raise €5.2 billion by the end of this month following the Central Bank’s stress tests last March.

A total of €2.4 billion is being raised by the bank from a cash and shares deal with subordinated bondholders where they are being forced to bear losses of up to 90 per cent on the value of their debt.

The Government is providing €1 billion by way of contingent capital.